If you’re familiar with cryptocurrency, you’re familiar with Bitcoin. Bitcoin was created in 2008 by a mysterious person (or group) under the name of Satoshi Nakamoto, and since then, has made history. In 2009, the software was made open source, and miners began to receive Bitcoin for their work. The advantage of Bitcoin is its transparency, as its ledgers are impossible to exploit because it is verified by majority rule. What is Bitcoin Cash, and how does it fit into this story?
Though revolutionary, there is one major problem with Bitcoin, its seeming inability to properly scale. For comparison, Visa can process up to 1,700 transactions per second, while Bitcoin is limited to just 7 transactions per second. Each transaction must be verified by miners, over a network of different computers. This is what makes Bitcoin decentralized.
Miners, however, don’t technically mine transactions. Instead, blocks (a collection of transactions) are mined, meaning that sometimes a transaction is left out of a block that is being mined at a given time, in which case they are held for the next one. This results in transactions sometimes taking several minutes or more to be verified.
Clearly, there is an intrinsic scalability issue with Bitcoin, and for everyday transactions, it just isn’t realistic. That’s where Bitcoin Cash comes in.
What Is Bitcoin Cash?
Here is a beginner guide on Bitcoin Cash and its differences with Bitcoin.
Bitcoin Cash was created by a group of Bitcoin miners and developers who wanted to solve the scalability issues of Bitcoin. Their aim was to solve this problem without sacrificing the decentralization or democracy of the currency. Bitcoin Cash (BCH) is on its very own blockchain, with its own specs. The one main difference from its predecessor is that it increased the block size in order to speed up verification.
Another difference is that the difficulty level of a block can be adjusted to suit the number of miners supporting it, in the hopes that this change would secure the chain’s survival. The BCH block was 8 times the size of Bitcoins (8MB vs 1 MB) but recently increased its block size to a whopping 32 MB, meaning fast, cheaper transactions.
Bitcoin Cash, however, has not become as popular as its predecessor. At the moment the BCH to USD conversion is 1 Bitcoin cash to $229.81 USD. Bitcoin, on the other hand, is worth $8,806.94. This comes from a range of factors including BCH’s high volatility and lack of adoption.
The Advantage Of Bitcoin Cash
As intended, Bitcoin Cash can be verified at a much quicker rate than BTC. Transaction fees are also noticeably smaller. It does what any good cryptocurrency should do, you can exchange funds with anyone in the world instantly. Unlike Bitcoin which can take a while to process, BCH is instant. You can transfer funds anonymously, like Bitcoin, and keep your identity safe. Now that the block size is 32MB vs Bitcoin’s 1MB, transactions are being processed faster than ever.
The Disadvantage Of Bitcoin Cash
BCH’s main downfall is its high level of volatility, i.e its inability to stay at a fixed price. There are a few factors that contribute to this.
BCH struggles with adoption, which means it can be harder to find real-world places that accept the currency as payment. In comparison with Bitcoin which has been accepted by many mainstream and traditional vendors, or ripple which is often used for cross border payment. This lack of adoption is a contributing factor toward the BCH’s instability. It also means that BCH will remain stagnant, and not be an attractive investment for many investors.
Another contributing part of the instability of Bitcoin Cash is its automatic adjustment system. This essentially means the computing complexity of the network is directly tied to the number of blocks that are available for mining. The fewer blocks available, the less complex the computing power of the entire system. This results in high volatility, which holds the coin back from mainstream adoption. As you can see, it’s a vicious cycle that the team behind BCH hasn’t solved yet.
How Can You Buy Bitcoin Cash?
If you want to get your hands on your own Bitcoin Cash, then going through an exchange is the simplest method. But you could also earn it by mining yourself. You’ll need an investment of equipment, time, and expertise for mining, however. Building your own mining rig would take an investment of up to a few thousand dollars, and you would need to gather equipment such as a rig frame, motherboard, processor, storage, RAM, and multiple graphics cards. As well as being a time-consuming and costly setup, your effort could go to waste, as these days with advanced mining pools and high levels of competition, it can be very hard to capture your share of the rewards.
Ready to mine cryptocurrencies? Learn how mining pools work!
The three largest exchanges that offer BCH are Coin Base, Kraken, and CoinEx. Exchanges will sell cryptocurrencies in exchange for a small fee. You can either trade in Fiat currencies such as USD or Euro, or in cryptocurrency you already possess. First, find an up to date Bitcoin Cash to USD converter (or whichever currency you want to trade with) and figure out how much the exchange rate is. At the moment 1 Bitcoin Cash is equal to $229.81.
Looking for an ideal cryptocurrency exchange service? Check out our Kraken vs Poloniex review!
Usually, an exchange will accept both fiat currencies and cryptocurrencies via credit card or bank transfer, although they vary on the types of payments available. You’ll need to do thorough research in order to ensure your choice of exchange accepts your currency and payment method.
Bitcoin Cash was created by a group of miners and developers to solve Bitcoin’s scalability problem. The idea was that since Bitcoin can’t be scaled effectively, it would never make it into the mainstream for everyday transactions like Visa. Bitcoin Cash adopted larger blocks to enable more transactions to be processed at any given time (32 times larger than Bitcoin as of 2020) to speed up the verification and enable scaling.
Unfortunately, this plan sort of backfired. Although the currency is somewhat accepted by the crypto community, it has failed to achieve adoption. Few are using the coin for everyday payments, and at the moment the coin is worth around 38 times less than its predecessor Bitcoin. Its lack of adoption along with its automatic computing complexity adjustment system that results in less complexity with fewer transactions to verify has left the coin volatile and unstable. It seems that by trying to solve Bitcoins issues, the creators of BCH have made a new set of more serious problems they have not yet been able to solve. It will be interesting to see what the future holds for Bitcoin Cash, and whether or not it can push its way into mainstream adoption.